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Wednesday, September 22, 2010

NewsSenate Democrats want middle-class tax cut voteSenate Democrats are aiming to force a vote extending tax breaks for the middle class -- and not for those in the top income bracket -- before they adjourn for the midterm elections. But it's not clear the vote will happen; and it depends on Democrats working out a procedural deal with Republicans.Fed hints it could buy more bondsThe Federal Reserve has opened the door to buying billions of dollars of Treasury bonds in a further programme of quantitative easing by making a substantial change to the policy statement issued after its September meeting.Fed: Recovery continues to slowThe U.S. economic recovery continues to lose steam, the Federal Reserve said Tuesday, but the central bank unveiled only tougher language but no new policies to try to spur growth. While the Fed said it expects improvement ahead, it cautioned "the pace of economic recovery is likely to be modest in the near-term."Obama Tax Credit Looks EndangeredSenate Democrats struggled Tuesday to develop a plan to extend the Bush-era breaks for middle-class people, and it is doubtful the Making Work Pay credit would be included, according to several people familiar with the situation.Tax credit bonanza for small businessesSix months after sweeping health care reform was enacted, the cost of health insurance remains one of the most pressing issues facing small businesses. Premiums typically run 18% higher for small businesses than for larger companies.Default Rate Nears '08 LevelMeasure Heads Below 3%, From 14.6% Last Fall; 'The Rebound Is Breathtaking'.Big changes to your health insurance Here's what you need to know about how your insurance is affected.The disconnect between productivity and hiringGenerally employers hire more employees to boost productivity. There are reasons why, despite dropping productivity numbers, it's not happening this time around.Auction of warrants from insurance company Hartford Financial brings government $706.3 millionIt was the latest move to recoup costs for taxpayers from the $700 billion financial bailout.Senate tax vote still possibleSenate Majority Leader Harry Reid said he is “working hard for a vote” next week on middle-class tax cuts and laughed off suggestions that he wants to retreat now to safer ground by waiting until after November’s election.Senate Republicans block 'don't ask, don't tell' repealAn effort to repeal the military’s “don’t ask don’t tell” policy, which bans openly gay men and women from serving in the armed forces, went down to defeat Tuesday afternoon, with Senate Democrats and Republicans unable to move past a procedural-vote impasse.The Profumo affairAlessandro Profumo was the creator of UniCredit, Italy's biggest and most successful international bank. But his relations with its directors and some big shareholders have been deteriorating for some time and, on Tuesday September 21st, the bank's board called an extraordinary meeting and decided, after a lengthy debate, to accept his resignation as chief executive.Greenspan’s Warning About Gold Echoes After Fed SpeaksOnly days after the former Federal Reserve chairman Alan Greenspan warned that “fiat money has no place to go but gold,” the dollar has collapsed to a new low.UK minister criticises capitalism, irks businessBritain's business secretary attacked unfettered capitalism on Wednesday and unveiled plans to review the way companies are governed and how takeovers work, angering business leaders.

BlogsWhat is Obama President of Again?Instead of listening to his generals, we learn that President Obama was “at odds with his uniformed military commanders. When the Pentagon presented President Obama with a “low risk option” of an additional 80,000 troops that had the “best chance to contain the Taliban-led insurgency and stabilize Afghanistan,” Obama “bristled at what he saw as military commanders’ attempts to force him into a decision he was not yet comfortable with.”Should Government Tax Debt?Certain economists, most notably Harvard professor Gregory Mankiw, have long advocated so-called Pigovian taxes aimed at discouraging pollution and other socially costly activities. Now two academics are suggesting such a tax might be applied to a dangerous behavior that has become popular in the U.S.: Taking on too much debt.Side Effects: The Obamacare Threat to Your LibertyStarting this year, Obamacare prohibits plans from placing lifetime limits on coverage, severely limits rescissions, and requires all plans to cover children up to age 26.When Did House Prices Get Out of Hand?If house prices hit bottom earlier this year (admittedly, that is a big if), then the house price index at the end of 2004 was at reasonable levels. The real bubble took off from 2005 through the middle of 2007.Are U.S. Interests Being Advanced at the U.N.?In anticipation of President Obama’s second address to the United Nations this week, the White House has published a lengthy press release titled “Advancing U.S. Interests at the United Nations” that lists the achievements of the administration at the United Nations.Economists React: Fed Prepares for ‘Gnarly Ride’Economists and others weigh in on the Fed’s statement following its September meeting.Higher Taxes = Deficit Reduction? Maybe in a Static EconomyA Washington Post article reports that letting the Bush tax cuts expire would nearly close the fiscal gap. This static logic misses two key dynamic aspects of the economy: (1) the political incentives that higher taxes bring about, and (2) the economic incentives of such policy.Some Things at Stake in the Tax Fight"Add in an average state rate of 5% and it is quite possible that higher income individuals will pay over 50% marginal tax rates, not counting existing FICA and Medicare tax of another 7.65% — we are approaching a European-like 60% federal and state tax burden."The Poverty Solution: Marriage or BustIn 2009, 3.7 million more Americans joined the ranks of the poor. Buried in the Census report are startling figures revealing that the collapse of marriage is creating this crisis of poverty.Parsing the Fed: How the Statement ChangedThe Fed’s statement following the September meeting included concerns about a low level of inflation and a slow recovery, indicating that though no new action was taken at this meeting more bond purchases may be in the offing.Did the Fed Really Say Inflation Isn't High Enough?What the Fed statement really means for your portfolio.The Lone Dissenter: Kansas City’s Hoenig Enters New TerritoryHoenig’s vote against the FOMC’s 8-1 decision to keep the federal funds rate near zero marked his sixth straight dissent of the year, the most by a Fed policymaker in a single year since at least 1994 when the Fed overhauled its communications practices.MBA: Mortgage Purchase Activity declines slightly"The seasonally adjusted Purchase Index decreased 3.3 percent from one week earlier."Who's Behind the U.S. Higher Education Bubble?We didn't set out to go looking for it, but we couldn't help but notice what would appear to be a really unique correlation between the average annual tuition at a four-year higher education institution in the United States and the total amount of money the U.S. federal government spends every year.How it sounds vs. How it really works, Part IIFifteen years seems like a pretty long payback period. That may explain why these houses (and mine for that matter) weren’t weatherized already.What Do Americans Want?It turns out that when Americans say they want spending cut, what they really mean is the trivial sum we spend on foreign aid; it also turns out that Americans actually don't know much about the structure of the US tax code.What New Jersey Pays for its PoliceThe Ledger also compiled a database for police salaries by municipality. Their analysis reveals that three out of every 10 officers makes over six figures and that the largest salaries are generally paid to officers in towns with the least crime.The Bad Financial Luck of the IrishIn order to say that Irish austerity offers a grim lesson for us, you need to know the counterfactual: how bad would growth, tax revenues, credit spreads have been without the austerity? And because of the magnitude of their problems, it is far from clear that austerity has made things worse.It’s over! (A long time ago)"The trouble is that we now know the recession ended just as the stimulus money started to get spent. According to the White House’s own 100-day stimulus report, issued at the end of May 2009, only $45.6 billion in spending and tax relief had gone out the door by then."Un-Stimulating BureaucracyFortunately, more and more Americans appear to be realizing that the government and its experts are the problem rather than the solution.New Orwellian Tax Scheme in England Would Require All Paychecks Go Directly to the Tax AuthorityOur tax system in America is an absurd nightmare, but at least we have some ability to monitor what is happening. The serfs in the United Kingdom, however, are in much worse shape.ObamaCare’s First Adverse-Selection Death SpiralObamaCare supporters can take comfort in this: since it might take healthy people a while to figure out that they’re better off financially if they drop their coverage and pay the individual-mandate penalty, ObamaCare’s health insurance exchanges might not collapse before their January 1, 2014, launch date. They could last until January 2.

Research, Reports & StudiesU.N. Millennium Development Goals: Foreign Aid v. Economic FreedomThe U.N.’s statist approach to development has led to the design of ineffective and sometimes wasteful development projects in Africa and elsewhere that generally do not address the underlying problems even as they strengthen the corrupt regimes that are the main obstacle to progress.Obamacare Increases Health Insurance PremiumsOne of the major impacts of the Patient Protection and Affordable Care Act is that individuals and families will see higher health insurance premiums. Obamacare imposes several costly new mandates and restrictions on health insurers and providers that will raise healthcares costs and therefore premiums.Free Markets and National Defense: U.S. Import Dependence on ChinaThe ideal policy would achieve the benefits of open exchange with a rival while preparing for the possibility of import interruption.Budgetary Savings from Military RestraintConcern about deficits has prompted greater scrutiny of all federal spending. But the cuts here would be prudent even in an era of surpluses. The United States does not need to spend $700 billion a year — nearly half of global military spending — to preserve its security. By capitalizing on our geopolitical fortune, we can safely spend far less.RCM: Wells Fargo Economics Group: Housing Starts Rose More Than Expected in AugustHousing starts rose 10.5 percent in August, which was well above expectations. Starts of single family homes increased 4.3 percent, the first monthly increase since April. Multi-family starts rose 32.2 percent.

Economists’ Comments & OpinionsObama Tricks Voters as Enron Hoodwinked Public: Amity ShlaesEven Holtz-Eakin approximated, texting back a formula that might serve as the theme song for tax year 2011: “39.6 + 2 (phaseout of pep and pease) + 3.8 (Medicare net investment income tax) = 45.4. Add in state-level taxes and 50 is easy to reach.”1920: The Great Depression That Wasn'tThe depression of 1920 was notable not only for its quick turnaround but also for its absence of political and monetary intervention. In many ways it was to be the curtain call for American laissez faire; to read of 1920 today sounds not only of another time but of another country altogether.COLE: Bank bailout's wasted cashFirst and most important, the $30 billion won't actually go to small businesses in the form of loans; it will go to small banks in the form of capital. At its heart, this plan is nothing more than a Son-of-Paulson TARP (Troubled Asset Relief Program) bank bailout - except, of course, that it is much smaller and is focused on community banks rather than Wall Street banks.Fair Pay Isn’t Always Equal PayA recent survey found that young, childless, single urban women earn 8 percent more than their male counterparts, mostly because more of them earn college degrees.The victims of 'consumer protection'When new laws and regulations limit the circumstances when banks can charge fees, they have to make their money in other ways. My bank used to offer me free no-minimum-balance checking -- but now wants to charge me $15 a month for the privilege.The Currency Crisis Has BegunThe currency crisis was bound to happen as soon as it became apparent that the dollar was caught in the grip of the 3-year cycle decline.The Defining Characteristics of a Good TradeA good trade fits your comfort zone, has a profit worth earning, has an acceptable level of risk, and has numbers to justify the trade.Fair Pay Is Not Always Equal PaySome of the bill's supporters admit that the pay gap is largely explained by women's choices, but they argue that those choices are skewed by sexist stereotypes and social pressures.'Trannie Mae' and special interestsPresident Obama's proposal for a transportation infrastructure bank has been lauded as a way to bring "rationality" to federal transportation spending. In fact, such a bank - call it "Trannie Mae" - will just increase the politicization and reduce the effectiveness of transportation dollars.

Book Excerpts"Private property rights do not conflict with human rights. They are human rights. Private property rights are the rights of humans to use specified goods and to exchange them. Any restraint on private property rights shifts the balance of power from impersonal attributes toward personal attributes and toward behavior that political authorities approve. That is a fundamental reason for preference of a system of strong private property rights: private property rights protect individual liberty." –Armen A. Alchian, "Property Rights" (2008)

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This blog is a weekday economic buzz, news, opinions, blogs, research and data aggregated by the Joint Economic Committee, Republican staff. Disclaimer: The content posted here is provided for information uses only and should not be construed as the views of the Joint Economic Committee Republicans.